Audit Results

The Division Frequently Exceeded Its Estimated Time Frames and Costs and Lacks the Data Necessary to Assess the Reasons for These Overages

Our review of 25 construction projects conducted by the California Department of General Services’ (General Services) Real Estate Services Division (division) revealed that it exceeded its initially estimated time frames and costs for the majority of the projects. Although, based on available documentation and interviews with division staff, a variety of factors contributed to these delays and cost overages, we noted some common factors that the division might have prevented if it had centrally tracked and analyzed data related to these projects. This lack of data hinders division management’s ability to do the following: assess how effectively it is delivering projects for its client agencies, identify undesirable patterns, and adjust its processes accordingly. Further, although the Project Management and Development Branch (project management branch) and Construction Services Branch (construction services branch) assert that they do not have a backlog—projects that have never begun or are unnecessarily on hold—both were unable to prove this assertion because they do not centrally track the required data. Additionally, the acting deputy director of the division, who spoke on behalf of the Building and Property Management Branch (building management branch), explained that the branch does have a backlog of projects, but its data do not distinguish whether a project is construction or maintenance. Thus, this branch could not demonstrate whether it had a backlog of construction projects. Given the frequency with which the division exceeded its original time frames for the projects we reviewed, it is reasonable to conclude that other projects were not able to begin on time, which is one definition of a backlog.

The Division Frequently Exceeded Estimated Time Frames for Completing Projects

We found that the division exceeded its estimated time frames for the majority of projects we reviewed. Specifically, as shown in Figure 1, the division exceeded its time estimates for 17 of the 21 projects we reviewed for which time frames had been prepared. Of those, six exceeded the initial estimate by more than 100 percent. Based on information provided by project managers and other available staff and our review of available project documents, we identified a variety of reasons for the project delays and some common contributing factors.

Figure 1
Summary of Selected Construction Projects Active Between January 1, 2011, and June 30, 2015, That Exceeded Time Frame Estimates

Sources: California Department of General Services’ Activity Based Management System and available project documentation.

Notes: To select our test items, we weighted our project selection based on the relative volume of work conducted by each branch. The Project Management and Development Branch had a significantly larger number of construction projects; thus, we weighted our selection more heavily from that branch.

We excluded construction projects conducted by the Building and Property Management Branch from this figure because, according to its former acting chief, the branch does not have procedures for developing time frame estimates. Further, none of the project files we reviewed contained evidence that the branch developed estimates.

Table 6, which lists the 14 projects that exceeded their estimated time frames by more than 10 percent, shows that project delays were attributable to various factors, including design deficiencies, inadequate planning, site conditions, and client requested scope changes. Our review of these projects found that in some cases the division may have been able to prevent the delays. We noted that in seven of the projects we reviewed, the project management branch overlooked key features in the respective project’s planning, design, or both. For example, General Services requested that the project management branch renovate the interior and exterior of its landmark State Library and Courts building to regain its historic character. The project management branch initially estimated that the project would take approximately 5 ½ years; however, it actually took more than 9 years to complete, of which only about a year was due to a bond freeze on all bond funded projects, with certain exceptions, ordered by the Pooled Money Investment Board in 2008 and therefore not within the project management branch’s control. The project management branch initially planned to perform the construction in phases in order to continue to occupy the building. However, a detailed analysis was later performed of the building’s infrastructure systems and it was determined that maintaining occupancy was not feasible and General Services had to seek approval from the Department of Finance to relocate the tenants, adversely affecting the project schedule. Had this type of analysis been done to inform its initial project schedule, the project management branch could have developed a more accurate time frame estimate. The extent to which this inadequate planning contributed to the project’s total delay is unclear because the project management branch does not adequately track the reasons for project delays and their overall impact on the project schedule.

Sources: Reports from the California Department of General Services’ (General Services) Activity Based Management System, available project documentation, and interviews with General Services’ Real Estate Services Division staff, including project managers.

Note: This table represents those construction projects we reviewed that exceeded the division’s originally estimated time frame by more than 10 percent.

* During the State’s financial crisis in 2008, the Pooled Money Investment Board ordered a temporary freeze, with certain exceptions, on all bond funded projects.

† Although all of the projects we reviewed generally lacked sufficient documentation fully demonstrating all factors contributing to project delays, there were two instances in which neither the documentation nor division staff could explain certain significant delays. Specifically, although we could identify that deficiencies in design contributed to delays for the Department of Toxic Substances Control’s project, neither documentation nor division staff could describe a significant portion of the delay. Further, the division could provide no documentation or explanation regarding why the State Board of Equalization project exceeded its estimated time frame.

‡ Unlike the other projects presented in this table, these two projects had noteworthy delays in the post construction phase—the phase subsequent to construction being completed. Specifically, based on available documentation, these projects experienced warranty issues, among other issues, which contributed to the delays.

In another example, the Department of Motor Vehicles (DMV) requested that the project management branch remove asbestos, perform a seismic retrofit, and renovate the offices at its headquarters building in Sacramento. The branch initially estimated that the project would take about four years; however, the project actually took more than 10 years to complete, which included addressing warranty related issues during the more than two year post construction phase. Certain delays on this project were caused by inadequate planning and deficiencies in design. According to documents provided by a capital outlay program manager, delays for this project were due to quality issues with the planning documents, such as the project schedule and testing requirements, as well as issues with the project design, which had to be reworked and undergo additional review. According to the program manager and the terms of the contract, DMV did not incur additional costs related to these issues.

However, in other cases, project delays may have been outside of the division’s control. For example, in our review of 21 projects for which the division prepared time frame estimates, we identified nine in which client agency requests contributed to project delays. For example, DMV requested that the project management branch perform a barrier removal and maintenance project at its existing office in El Cajon. The design phase took over 1 ½ years longer than estimated because the client requested additional work, such as reconfiguring a lobby and adding a perimeter fence. Similarly, for a room alteration at the California Department of Public Health’s (Public Health) Richmond lab, the construction services branch completed the original scope of work, but Public Health then requested that the branch use the funds saved relative to its original estimate to purchase and install additional items, including a new roof exhaust motor and dressing room bench. The division could not have predicted this additional request, which extended the completion date of the project.

When the division exceeds estimated time frames for reasons within its control, it can negatively affect the client agencies’ ability to effectively conduct business. In response to a satisfaction survey we distributed to the client agencies of the 21 projects we reviewed, 11 client agencies reported concerns about the division’s time frames, and four noted delays that affected their agencies’ operations. For example, the California Department of Transportation (Caltrans) requested that the project management branch renovate one of its district offices in Eureka. Ultimately, the project took two years to complete, or nearly 50 percent longer than its original estimate, some of which was because of client requested scope changes. In response to our survey regarding this project, Caltrans reported that the project management branch’s continued extensions to the project completion date adversely affected employee morale, increased rental costs by a year for housing staff displaced during the project, and created additional workload for its headquarters' administrative staff. These types of delays result in dissatisfied customers, can cost client agencies additional money, and can ultimately affect the agencies’ abilities to serve the public.

Project Costs Frequently Exceeded the Division's Estimates, and the Division Did Not Always Prepare Cost Estimates

Figure 2
Summary of Selected Construction Projects Active Between January 1, 2011, and June 30, 2015, That Exceeded Time Frame Estimates

Sources: California Department of General Services’ Activity Based Management System and available project documentation.

Notes: To select our test items, we weighted our project selection based on the relative volume of work conducted by each branch. The Project Management and Development Branch (project management branch) had a significantly larger number of projects; thus, we weighted our selection more heavily from that branch.

We excluded construction projects conducted by the Building and Property Management Branch from this figure because, according to its former acting chief, the branch does not have procedures for developing cost estimates. Further, none of the project files we reviewed contained evidence that the branch developed estimates. Additionally, the project management branch did not prepare complete cost estimates for two projects.

We found several factors that contributed to projects’ cost overages. As shown in Table 7, of the seven projects that exceeded the cost estimates by more than 10 percent, one overage occurred in part because there were deficiencies in design. Specifically, according to project documentation, the project costs for the California Highway Patrol’s new area office in Oakhurst increased primarily due to inadequacies in the contractor’s design for a communication tower, along with numerous small errors. Although we were able to identify this as a reason for the cost overage for one of the projects we reviewed, as we discuss later, the division cannot readily conduct an analysis for all of its projects to identify reasons for, and the impact of, cost overages because it does not centrally track this information. If it did, the division could better determine whether it might be able to improve its cost estimation process based on recurring deficiencies.

Remove asbestos, perform a seismic retrofit, and renovate headquarters building in Sacramento

22†

✓

Department of Motor Vehicles

Remove barrier and perform maintenance in existing office in Hawthorne

18

✓

California Highway Patrol

Construct a new area office in Oakhurst

13

✓

Construction Services Branch

Department of
Parks and Recreation

Retrofit restroom at the
California State Railroad Museum

60%

✓

✓

California Department of General Services

Repair balcony drain leaks and damages at the California State Archives

25

✓

Total counts of each factor

1

2

5

Sources: Reports from the California Department of General Services’ (General Services) Activity Based Management System, available project documentation, and interviews with General Services’ Real Estate Services Division staff, including project managers.

Note: This table presents those construction projects we reviewed that exceeded initial estimated costs by more than 10 percent.

* This project experienced significant scope changes during the planning phase, including an increase of approximately 70,000 square feet to the facility plans.

† As of February 2016, this project was in the postconstruction phase and was scheduled to be completed on March 31, 2016. Until the postconstruction phase is complete, project costs may increase.

Although some factors contributing to inadequate cost estimates may be preventable, others may not, such as client agency requests. Of the seven projects that exceeded the division’s initial cost estimates by more than 10 percent, five experienced client changes to the project scope that at least partially contributed to the increases. However, because of the limited documentation available, we could not fully quantify how much project scope changes added to their cost. For example, as we mentioned in the previous section, the DMV made several subsequent scope changes to its El Cajon project that affected not only the initial estimated time frames but the cost estimates as well. Similarly, for the DMV’s headquarters in Sacramento, the project scope expanded after the original estimate to include replacement of the central plant cooling equipment, leading to higher estimated costs. Additionally, for the veterans’ home example we described previously, the project scope expanded after the original estimate to include roughly 70,000 additional square feet and a longer construction time frame. These changes primarily inflated the project’s cost.

The issues we identified based on available documentation or interviews with division staff had varying effects on project time frames and costs. In some cases, projects that exceeded their time frames did not always have corresponding cost overages. For example, as shown in Table 6, a project requested by the Department of Toxic Substances Control exceeded its original estimated time frame by 35 6percent. Although the project management branch could not provide sufficient documentation or describe fully the reasons for the approximate one year delay, it did cite design deficiencies as one primary factor in the delay. However, this project actually cost substantially less than the original cost estimate. In contrast, a balcony repair project at the California State Archives—a building owned by General Services—exceeded its original estimated costs by approximately 25 6percent because of site condition issues. However, it only exceeded its estimated time frame by six days, or less than 10 percent; thus, we did not include this project in Table 6.

Differences between initial estimates and final project costs can have negative consequences for client agencies. As part of our survey of client agencies, we asked if they had any concerns with the costs of their projects. Seven of the 21 responses to this question indicated that they did have concerns. For example, the California Highway Patrol indicated that it had concerns regarding how it would pay for the additional project costs. We also asked client agencies whether they felt that the change in project costs affected their operations, including their abilities to provide services to the public. Of the 18 client agencies responding to this question, four indicated that the increase in costs had affected their agencies’ operations. For example, the California Department of Forestry and Fire Protection replied that the changes in project scope and timeframes for the replacement of buildings at its Bautista Conservation Camp, which the project management branch oversaw, had an adverse impact on the operational readiness and functionality of the camp, including the ability to adequately house the inmates who work at the camp.

Additionally, for a total of six of the projects we reviewed, four lacked cost estimates altogether, and two had incomplete cost estimates. Specifically, four of these projects were overseen by the building management branch, which we describe in the next section. The remaining two projects were completed by the project management branch, which did not develop complete cost estimates due to the unique nature of the projects, according to the respective project managers. For example, one project was established to make roofing repairs on an as needed basis on the building occupied by General Services’ Office of State Publishing (State Publishing), which planned to move to another building in the future. Although the project management branch’s contractor recommended that State Publishing retrofit its roof with a new roof system based on an examination of the roof’s condition, and developed a cost estimate for the full replacement of the roof, the project manager explained that General Services’ management at the time rejected replacing the roof and opted to continue patching and repairing the roof as needed. As a result, according to the project manager, the division conducted work upon request instead of developing an initial estimate for the entire project, the full scope of which was unknown. The construction services branch, which performed the construction work for the project, initially estimated thatthe repairs would cost roughly $250,000; however, its estimate did not include the project management costs incurred by the project management branch, nor did it include subsequent repairs beyond the original project scope. Overall, State Publishing spent more than $500,000 for these repairs and associated project management costs.

As part of our client agency survey, State Publishing indicated that it had concerns with the costs associated with these repairs and stated that the division rarely communicated project costs. Our review of the project manager’s process for communicating costs for this project revealed, as we describe later in Audit Results, that the project manager did not share change orders with State Publishing. When we asked why he took this approach, the project manager told us that he typically reviewed State Publishing’s request, confirmed there was enough funding to cover the request, and approved it. Despite the ad hoc nature of this project, we believe that each time a roof repair was conducted the project manager should have shared an estimate, including associated project management costs, with State Publishing so that it was aware of and could better anticipate each repair’s cost.

For the other project, the project management branch provided oversight and other services for the Secretary of State’s purchase and installation of shelving units for the California State Archives. The project manager provided the Secretary of State’s Office with a basic estimate of the branch’s project management, architectural, and structural engineering fees. According to the project manager, the project management branch did not estimate all costs for this project because the Secretary of State’s Office handled negotiations with the vendor and the division had limited responsibility, mostly related to inspection and project management. Thus, it did not believe a full estimate was necessary. However, the project manager’s estimate excluded the cost of the inspection services for which the division was responsible, and therefore it did not provide the Secretary of State’s Office with complete information. Additionally, the estimate was less than half of the nearly $70,000 the project management branch ultimately charged the Secretary of State’s Office for project management, design, and inspections. Despite the cost increases, the Secretary of State’s Office did not raise issues in our client agency survey with the division’s communication or cost estimates for the project, and rated its interactions with the division favorably.

The Building Management Branch Lacks a Process for Estimating Project Time Frames and Costs, and It Has Not Formally Evaluated the Adequacy of Its Structure or Staffing

As we mentioned in the previous section, we were unable to obtain time frames or cost estimates for the four projects we reviewed from the building management branch because, according to its former acting chief, the branch does not have procedures for developing such estimates. In fact, it is the only branch of the division that oversees projects but does not have cost estimators. Instead, according to the assistant chief in the building management branch, the costs for these projects are built into the tenants’ rental rates. According to the building management branch’s former acting chief, in lieu of estimating time frames and costs, project managers may share historic estimates for similar projects with clients; however, she acknowledged that the accuracy of these estimates is questionable. Further, none of the project files we reviewed contained evidence that the branch shared historic estimates with the client agencies. Without actual estimates, client agencies are likely hindered in their ability to adequately anticipate and plan for a project’s duration. Additionally, by not estimating costs, the branch limits its ability to appropriately set its rental rates to meet ongoing building needs.

The building management branch’s lack of estimating staff may be attributable to the fact that it has yet to conduct a review of its structure, including a staffing analysis, to determine whether it is organized in a manner that most effectively and efficiently meets the needs of its client agencies. In particular, the former acting chief of the building management branch explained that when the branch was last reorganized—in 1997—many state buildings were newer and less technologically complex than they are currently. She stated that due to the current age of the buildings and advances in technology, as well as an increase in the number of properties, the building management branch has a larger workload and more complex projects than it did previously. She acknowledged that the branch has yet to restructure to address this complexity and increase in workload. According to the acting deputy director of the division, he is currently evaluating the branch’s structure, which will include assessing its staffing. Although he could not provide a date as to when the evaluation would be complete, he indicated it would be done in the very near future. Nevertheless, given that the building management branch was last reorganized nearly 20 years ago and its workload has grown in size and complexity, we find it concerning that a formal evaluation of the branch’s structure and staffing is just now being undertaken.

Without a process for estimating project time frames and designated staff to derive such cost estimates, the building management branch cannot provide client agencies with critical information regarding their projects, nor can it assess its own processes. Additionally, the branch cannot monitor how efficiently or effectively it delivers these projects without first estimating costs. For example, in response to our client agency survey, the Department of Water Resources (Water Resources) indicated that the building management branch took several years to complete a roofing project. Further, Water Resources explained that the project delay pushed construction into the rainy season, which resulted in rainwater leaking through the unfinished roof. Water Resources explained that this leak caused an unsafe work environment, and it was forced to move staff into a temporary location.

Although both the project management and the construction services branches have estimating staff, the building management branch does not seek the assistance of these staff, in part because, according to its acting chief, it does not want to pay the other branches who conduct work on a feefor service basis to perform this service. However, by investing additional funds to obtain actual cost estimates, the building management branch could better assess its performance, including its method for setting rental rates.

The Division Lacks the Data Necessary to Track and Analyze the Reasons for Project Delays and Cost Overages

Although the division has a data system—the Activity Based Management System (ABMS)—that it could use to track costs and time frames for its projects, none of the branches use the system to centrally monitor whether projects are on schedule or to identify the reasons for project delays or changes in cost. Instead, the project management branch and construction services branch expect their project managers to individually track projects using charts developed in Microsoft Project, which are not housed within ABMS. Further, the former acting chief of the building management branch stated that it has no process for its project managers to estimate project time frames or evaluate whether it delivers construction projects in a timely manner. The branches also lack procedures for identifying and tracking the reasons for time delays and cost overages and leave this process up to the individual project managers. As a result, if division management needs details about a given project’s delays or cost overages, it generally must contact the individual project manager. In using this approach, the division risks that project managers inconsistently document the reasons for cost overages and project delays, and it may not have the necessary project details in the event that project staff leave the division. In fact, our review of projects found that the reasons for time delays and cost overages were not always clearly documented or were missing altogether.

For example, the State Board of Equalization requested that the division perform office alterations, including the building of one hard wall office, which the project management branch estimated would take approximately 1 ½ years; however, based on records in ABMS, it took more than two years to complete the project. A supervising architect within the project management branch stated that the planners and project manager responsible for this project are no longer with the division, and he could not provide any documentation explaining why the project exceeded its time frame. He also noted that based on typical time frames for these types of projects, it seems clear that the project experienced times of inactivity that did not add to the overall project cost. Although the supervising architect identified some reasons that may have contributed to the delay through the project notes—such as client review, quality assurance checks, and schedule conflicts with other projects—this process is not sufficient in the event that the project management branch must defend the reasons it exceeded estimated time frames or assess how to prevent these typesof delays on projects in the future.

During our review of 25 projects, we were able to identify some common factors contributing to project delays or cost overages for most projects—such as design deficiencies, planning inadequacies, site conditions, or client requests—based on reviewing available project documentation and interviewing roughly 30 different staff members, including project managers. Because the branches lack centralized data that contain the reasons for time frame delays and cost overages, they would need to perform similar time intensive reviews and inquiries to determine how effectively they are delivering all construction projects. Further, because project managers are not required to clearly document the reasons for time delays and cost overages, the division’s evaluation of its effectiveness would be further hindered. If the branches centrally tracked the causes for delays and cost overages for their entire workload, they could readily assess how well they deliver services and revise their time frames and cost estimating practices accordingly.

The chief of the project management branch, who spoke on behalf of all of the division’s branches, explained that ABMS was designed only to track project costs and was not intended to be used as a project management tool. He further indicated that the division has added functionality to ABMS that would allow it to track some project time frames, such as the ability to record dates for all tasks associated with a project, specifically for the purpose of providing quarterly reports to the Legislature on the division’s capital outlay projects. However, he stated that the division did not add the functionality that would allow it to extract this data for global reporting purposes. When we questioned why the division did not request the addition of this functionality with the other system changes, the project management branch chief explained that it did not occur to the division to use those fields for project management purposes or to implement such a reporting function until we discussed it with them during the course of the audit. Branch management agreed that it should be tracking these data and using them to evaluate its processes.

The inability to track this critical project information is particularly surprising considering that the division has known since at least 2006 that it should make this a priority. Specifically, General Services commissioned a private consulting firm to evaluate the division’s organizational structure, and in January 2006 the consulting firm issued its report. One of the consulting firm’s main observations was that the division had weak reporting and few metrics to manage its business. To address this observation, the consulting firm made several recommendations, including that the division design and implement performance management practices, evaluate and improve its data management infrastructure, and strengthen its management reporting capability and performance metrics. Although the division currently has a strategic plan that covers 2014 through 2018, it lacks specific goals and objectives that would allow it to measure its performance in terms of delivering projects on time and within cost estimates. Further, as we discussed previously in this section, it has not developed the data management infrastructure that would allow it to consistently and effectively evaluate its performance.

When we asked the division why it has not developed such an infrastructure or performance measurement given that the consulting firm recommended these improvements in 2006, a capital outlay program manager in the project management branch indicated that the division is in the process of implementing a new project management system called Primavera. He asserted that the division initially proposed this new system in 2007 and explained that turnover in General Services’ information technology management delayed these efforts. Additionally, the program manager explained that General Services learned about the Financial Information System for California (FI$Cal), which is a statewide business transformation project in the areas of budgeting, accounting, procurement, and cash management that will include implementing Primavera. He further indicated that the statewide implementation of Primavera is anticipated for July 2017. The division has contracted with a consultant to assist it in implementing Primavera, and, according to the program manager, is making recommendations to the statewide FI$Cal project team to ensure the system meets the division’s needs and provides it with the capability to implement our recommendations, and developing an implementation plan.

The lack of data also prevents division management from assessing its backlog of projects at various phases during the project life cycle. During our audit, the project management branch manually compiled a spreadsheet listing its current projects, at the request of General Services’ director. According to the division’s acting deputy director, General Services’ director asked the project management branch to do this because he was interested in examining that branch’s service delivery process and ways that it could be improved. He explained that because the director’s concern was specific to that branch, he did not request that the other two branches—construction services and building management—compile a similar report. In response to the director’s request, the project management branch separated this list by active, inactive, pending, and completed projects. Although the branch reported that, as of November 2015, it had roughly 250 projects listed as pending—which, according to branch management, are projects that are temporarily paused and may be waiting on one item, such as a client response, or newly requested projects that have yet to be assigned to a project manager—branch management confirmed that it could not readily identify why or how long each of these projects had been pending without manually reviewing each project file. Additionally, the branch reported that it had more than 80 projects that were inactive, suspended, or on hold, which the chief explained are completely stopped and unlikely to ever move forward. For some of these projects, the spreadsheet indicates they are inactive because the branch is waiting for a response from the client agency or the project is pending funding or contract award. However, in most cases the spreadsheet does not specify the reasons why projects are inactive or, for any of the inactive projects, indicate how long they have had that status, because the division does not centrally track those data. Thus, it is possible that some of these projects were requested and never started.

None of the branches have policies for tracking their potential backlogs or determining the reasons that projects may be pending. Further, despite the fact that the project management and construction services branches do not track the necessary data, each branch’s management asserted that they do not have backlogs. Specifically, the chief of the project management branch stated that the branch ensures it does not have a backlog by monitoring staff workloads through regularly scheduled meetings, for which they do not maintain minutes, and would know if any work had not been assigned or was pending. Further, the acting chief of the construction services branch stated that although the branch has an active project tracking spreadsheet that it reviews with its area managers on a monthly basis, this spreadsheet is not consistently updated and is missing key data for many of its projects, such as construction start and end dates, and does not contain the data elements necessary to track whether a project is on time, exceeding its time frame, or on hold. Moreover, such informal methods of monitoring workload fail to ensure that projects do not sit unnecessarily idle. Additionally, according to the acting deputy director of the division, who spoke on behalf of the building management branch, the branch has a growing backlog of projects, which may include some construction projects. However, he explained that the branch’s data do not distinguish construction projects from other projects, such as maintenance. Thus, the building management branch could not demonstrate whether it had a backlog of construction projects. As a result, because the branches rely on informal manual processes at best, the branches cannot be certain that all of their projects are proceeding as they should.

Adopting Job Order Contracting Could Reduce Overall Project Time Frames and Costs for Certain Types of Projects

Currently, the division must conduct competitive bidding for its construction contracts except under limited circumstances authorized by state law. When the division uses competition to award a contract, it must award it to the lowest responsible bidder. The State Administrative Manual indicates that this method of procurement could take the division up to six months to complete. However, this may not be the most efficient option for the division’s smaller, frequently repeated types of construction projects. Of the 16 projects we examined that required competitive biddingand had adequate documentation regarding the length of this contracting process, we noted that the division took an average of nearly five months to complete this process. Although nearly five months may be reasonable for projects that are larger and more complex in nature, this procurementmethod may not always be necessary for less complex, recurring projects. Additionally, for these smaller projects, the up to six months needed to complete a competitive bidding process could be disproportionately long compared to the actual time required for construction.

However, there is a contracting method that certain public entities can use within the constraints of state law. Specifically, the Los Angeles Unified School District (Los Angeles Unified), the University of California (UC) Office of the President, and the California State University (CSU) Office of the Chancellor all use a contracting method referred to as job order contracting particularly for their smaller and more easily repeatable projects. Job order contracting is a procurement method intended to accelerate the completion of projects, lower costs, and reduce the complexity of the contracting process. Under job order contracting, contractors bid on prices for specific construction tasks, rather than for a specific project. Job order contracting is generally believed to be well suited for repetitive jobs and ill suited for large, complex constructionprojects that require extensive or innovative design or are likely to encounter changes and revisions during construction. According to Los Angeles Unified’s assistant contracts administration manager, it first implemented job order contracting in 2005, while officials from the UC Office ofthe President and the CSU Office of the Chancellor indicated that they implemented this contracting method in 2008 and 2000, respectively.

This project delivery method allows entities to complete multiple projects through one master contract instead of seeking competitive bids for each project. For example, according to the director of construction services for the UC Office of the President, if a campus wanted to replace anumber of dormitory doors over the next three years, it would hire the contractor using a job order contract. He explained that to bid the project, the campus would put together a book that describes the rates, materials, colors, and other details that the contractor would need to know to complete the project. The contractor would then develop a bid based on a percentage of the cost estimated and published in the book. Once the UC Office of the President selects a contractor, the contractor can replace any number of dormitory doors the campus desires up to the time or money limit specified in the contract.

All three entities that use job order contracting described various savings a well run program can provide. For example, the assistant contracts administration manager for Los Angeles Unified provided records indicating that the district had saved nearly $700,000, or more than 5 percent,in quantifiable costs from its own cost estimates using job order contracting for projects approved between August and November 2015, not including any costs associated with saving staff time. Further, the officials we spoke with from Los Angeles Unified and the UC Office of the President’sconstruction services indicated that job order contracting saved time for each project by enabling them to competitively bid one master contract. The director of construction services for the UC Office of the President stated that the university system completes hundreds of projects every year using its job order contracting program, with savings of up to eight weeks per project. For example, he stated that dorm rooms may become available unexpectedly or on short notice, and job order contracting allows these rooms to be renovated with just days of notice, in turn allowing the rooms to become available to students within two or three weeks. According to the director of construction services, the traditional competitive bidding method would take between six and eight weeks of advertising, bidding, and contract work before construction could even begin. In thisexample, he explained that job order contracting allows students to be housed sooner while also bringing in revenue without losing extra months of payments.

However, officials for all three entities described challenges with awarding job order contracts to the lowest responsible bidder, as required by state law for UC and CSU, and previously required for Los Angeles Unified. According to Los Angeles Unified’s assistant contracts administration manager, in the beginning of the program, the district faced some challenges but has since resolved those issues. For example, she explained that some contractors bid too low on job order contracts and then did not have the appropriate level of staff or the ability to complete concurrent district wide projects. Similarly, the UC Office of the President’s director of construction services described situations in which contractors would underbid a job order contract to win the award, only to try to make up the difference later through the amount they billed per project. Los Angeles Unified’s assistant contracts administration manager explained that since early 2013—due to a change in the law governing the district’s job order contracting pilot program—the district has been authorized to award contracts to the most qualified and prequalified bidder. Under this model, using preestablished criteria, the district may consider a bidder’s qualifications, rather than awarding the contract based solely on the lowest bid.

The March 2015 report by the Legislative Analyst’s Office (LAO), The 2015–16 Budget: Addressing Deferred Maintenance in State Office Buildings, which we describe in the Introduction, recommended that General Services be provided the authority to use job order contracting to streamline and add flexibility to its contracting process as one way to help prevent more deferred maintenance. The LAO defines deferred maintenance in its report as situations in which either routine maintenance—the recurring activities necessary to keep facilities in good condition—or larger maintenanceprojects, such as the replacement of building components when they reach the end of their useful lives, are not conducted as scheduled and are delayed. Although construction projects—the focus of our audit—are different from deferred maintenance, we believe that some of the less complex, recurring projects, such as adding a private office, making upgrades to comply with the Americans with Disabilities Act, or completing roof repairs, are similar to some of the deferred maintenance projects referenced in the LAO’s report.

In our judgment, allowing General Services to implement job order contracting could save the State time and money. However, given the challenges we have noted throughout this report, we believe that if General Services were given the authorization to implement such a program, it would need to begin small and closely monitor its efforts, similar to the approach the Legislature took with Los Angeles Unified. Specifically, before authorizing the job order contracting method for all school districts in January 2016, the Legislature authorized Los Angeles Unified to implementjob order contracting via a pilot program in January 2004. As part of this pilot program, Los Angeles Unified was required to regularly report using a consistent method its progress to the Legislature. Authorizing General Services to conduct such a pilot program with initial and consistent oversight from the Legislature throughout a trial phase would allow it to demonstrate that it is capable of managing such a program in a responsible manner while potentially saving time and costs for its client agencies.

When we asked the division’s acting deputy director for his perspective on whether the division could benefit from implementing a job order contracting program, he stated that General Services has not taken an official position on the use of such a program. He explained that although the division would appear to benefit from another project delivery method, such as job order contracting, he suggested that a pilot program would be needed to verify certain benefits prior to full implementation.

The Legislature has previously considered allowing General Services to implement job order contracting for public works projects. In February 2010 legislation was introduced to authorize General Services to undertake public works projects by using job order contracting; however, the bill failed to pass. The American Federation of State, County, and Municipal Employees, the Association of California State Supervisors, and the California State Employees Association were among those that opposed the bill, and the written opposition to the bill stated that job order contracting does not properly serve the best interests of the California taxpayer. Those in opposition further asserted that the most cost effective way to ensure that public safety, specific building codes, and inspections are met and held to high standards is to use the existing model of competitive bidding. However, as illustrated in the LAO’s report and the experiences of other public entities within the State, when the division must competitively bid every construction project, especially those that are frequently requested and are less intricate in nature, it risks increasing the costs and length of time to complete such projects.

The Project Management Branch Has Not Determined Why Its Rates Are Significantly Higher Than Those of Private Firms

The budgets of public works projects managed by the project management branch include costs relating to planning, project management, design, review, inspection, and administrative services.3 Many of these costs are charged through an hourly rate to client agencies and can drive up the cost of projects. In one specific example, the project management branch provided an estimate in response to the State Board of Equalization’s request that it replace one of its file room doors. As seen in Table 8, the construction portion of the cost estimate accounted for only $3,000 of the more than $17,000 total cost estimate that the project management branch provided to the State Board of Equalization in January 2015. The nearly $14,000 remaining included costs for project management, architectural, and construction inspection services, as well as plan review services by the Division of the State Architect within General Services and plan review and inspection services by the Office of the State Fire Marshal. Ultimately, according to the State Board of Equalization, it chose to forgo this project because of the high cost estimate, but this example illustrates how a simple construction project can become costly for client agencies.

Table 8
Project Cost Estimate for New Door in Existing Opening for the State Board of Equalization

SERVICES PROVIDED

PROJECTED HOURS

HOURLY RATE

TOTAL

Services Provided by the Real Estate Services Division

Project Management and Development Branch

Project Management Services

Request Activity Based Management System (ABMS) number, prepare form for fund transfer

2

$182

$364

Set up tasks, monitor ABMS, obtain mission-critical statement

2

182

364

Construction administration

2

182

364

Coordinate with Service Contracts Unit/prepare forms

2

182

364

Project closeout

2

182

364

Subtotals

10

$1,820

Architectural Services

Oversee working drawings preparation

8

$182

$1,456

Prepare technical specifications

1

182

182

Obtain Division of State Architect and State Fire Marshal approval

4

182

728

Review/approve contractors' submittals

1

182

182

Respond to contractors' Requests for Information

1

182

182

Coordinate change orders

1

182

182

Subtotals

16

$2,912

Prepare Working Drawings

24

$130

$3,120

Construction Services Branch

Quality inspections/closeout (includes travel expenses)

24

150

$3,600

Services Provided Outside of the Real Estate Services Division

California Department of General Services' Division of the State Architect

Plan review/back check/approval

$600

California Department of Forestry and Fire Protection's Office of the State Fire Marshal

Plan review/back check/approval/inspections

1,800

Planning, Project Management, Design, andReview Services Total

$13,852

Construction Cost Estimate

Reuse existing door, new frame/hardware and paint

$3,000

Architectural Revolving Fund assessment*

208

Project Cost Grand Total

$17,060

Source: Project cost estimate prepared by the Project Management and Development Branch of the California Department of General Services’ Real Estate Services Division, dated January 7, 2015.

* To recover the Architectural Revolving Fund (fund) deficit, the Budget Act of 2008 imposed a surcharge on nonfederal and nonbond funded projects for which money is deposited into the fund.

In addition to the fact that nonconstruction costs can make up a large portion of the overall budget of a project, particularly for smaller projects, the project management branch’s hourly rate for design, project management, and construction management services is much higher than comparable rates of private sector firms conducting similar work for the State. Administrative and overhead expenses make up a sizable portion of this hourly rate. As seen in Figure 3, the project management branch charged nearly a $182 hourly rate in fiscal year 2014–15 for these services. According to a manager within General Services’ Office of Fiscal Services, Budgets and Planning section, the office works in conjunction with the project management branch to recalculate its hourly rate annually to account for multiple costs, including the salaries, wages, and benefits of employees directly related to design, project management, and construction management as well as operating costs for the branch, division, and departmental levels. Specifically, she explained that these costs include various administrative and overhead costs, such as those relating to General Services’ executive staff and various central service offices, and those for executive and support staff within the division and project management branch. Figure 3 shows that administrative and overhead costs make up roughly $42, or nearly 23 percent, of the project management branch’s hourly rate.

Figure 3
Composition of the Project Management and Development Branch’s Hourly Rate for Project
and Construction Management Services
Fiscal Year 2014–15

When we asked the project management branch whether it had conducted any analysis of how its costs compare to those of private firms performing similar work for the State, it pointed us to a report dated February 2015 that it provided to the former deputy director of the division. Specifically, the project management branch prepared a Rate Analysis Reportthat analyzed how its hourly rate compared to those of 26 private architectural and engineering firms and proposed strategies to maintain its price competitiveness in the marketplace. The analysis of contract rates charged by the 26 private firms found that these firms charged an average hourly rate of $136, or 25 percent less than the $182 hourly rate charged by the project management branch. The project management branch concluded that it was pricing itself out of the market and emphasized that administrative and overhead costs have largely contributed to increases in its hourly rate over the last several years.

We conducted our own analysis of how the branch’s hourly rate, after excluding administrative and most overhead costs, compared to that of two private firms’ contracts the branch had on retainer during fiscal year 2014–15 that contained the most comparable positions to those included in the branch’s hourly rate, and found the rates were similar. Specifically, we determined the branch’s hourly rate was $153 after we excluded the administrative and most overhead costs shown in Figure 3.4 We then calculated the average hourly rates charged by the two private firms for only those comparable positions included in the branch’s hourly rate to reach an average hourly rate of $149. Based on this comparison, it appears that the project management branch’s administrative and most overhead costs at least contribute to its higher hourly rate.

Although our analysis points to administrative and most overhead costs as one driver of the project management branch’s higher hourly rate, the branch itself has not fully ascertained why its rates are so much higher than those of private firms. As we described in the Introduction, the project management branch manages its workload by frequently contracting with private architecture and engineering firms to perform design and construction management work for its projects. The project management branch’s Rate Analysis Report indicates that a primary reason for its higher hourly rate is that the branch is not recovering the costs of the administrative services it provides to private firms when they contract with General Services. Consequently, because the project management branch recovers its administrative and overhead costs only from clients whose projects it is solely responsible for completing, these clients are absorbing the costs for administrative services the branch provides on projects contracted out to private firms. In its Rate Analysis Report, the project management branch contemplates collecting fees from client agencies whose work the branch outsourced to private firms to recoup the administrative expenses, such as legal and fiscal services, incurred as a result of these projects. Specifically, the project management branch proposes charging the client agency an 8 percent fee on architecture and engineering services contracts, as well as a 0.6 percent charge on construction contracts. In its report, the project management branch contends that by collecting these fees from the client agency it could reduce its hourly rate by $9.

The project management branch could not provide us with the number of projects it annually outsources to private firms, and without this information it cannot identify the amount of administrative and overhead costs it could recover from the client agencies for whom it outsources work. Further, the branch could not describe how it arrived at the 8 percent charge it proposed assessing on the work completed by private firms. In fact, the project management branch chief stated that the charge may need to go as high as 15 percent. This lack of certainty illustrates the inadequacy of the project management branch’s Rate Analysis Report, as the changes it proposed to recoup its administrative costs from the client agencies it outsources work for are not sufficiently supported. To further illustrate this point, the budget officer in General Services’ Office of Fiscal Services stated that the office tried but could not validate the figures used by the project management branch in this report. When the project management branch does not fully analyze the reasons its hourly rate remains higher than those of private firms providing similar services to state agencies, it cannot ensure that its rates are competitive for its client agencies and that it is providing the State with the best value.

The Division Could Improve Its Approach for Communicating Project Status to Client Agencies

The division does not establish clear expectations for how its project managers are to communicate changes in project costs and time frames to its client agencies and other stakeholders; rather, it leaves this up to the discretion of each project manager. To understand how the division’s communication styles affect the client agencies, we conducted a client agency survey inquiring about various aspects of the project life cycle, including the division’s communication of project time frames, project costs, and billing practices. The responses to this survey showed that the division could improve its communication methods in several areas. For example, eight out of 20 respondents indicated that the division sometimes or rarely adequately explained the reasons for project time frame changes. If the division does not effectively communicate with client agencies, client agencies may lack critical information regarding project status and be hindered in their ability to adequately anticipate and respond to project delays or escalating costs.

Further, the policies of the three branches do not require project managers to promptly relay information such as time frame delays, cost changes, or change orders to client agencies. For example, the project management branch’s policy manual states that the level of reporting to client agencies may vary depending on the level of involvement desired by the client agency and the level of technical expertise within the client agency. According to the chief of the project management branch, project managers, along with the client agency, have the discretion to establish a communication plan, typically through a project management plan, that they feel best fits the project’s and client agency’s needs. Examples of project management plans we saw included weekly or biweekly meetings with the client agency and contractor to ensure that all parties are updated on project status. However, by not requiring a minimum level of communication, the division risks that project managers are not communicating with client agencies as effectively as they could be.

In fact, we identified four instances—three in the project management branch and one in the building management branch—in which project managers could not demonstrate that they communicated crucial project information to client agencies. We reviewed a selection of change orders associated with the 20 projects we reviewed that had change orders to determine whether the division approved them and communicated their existence to the client agency. In one case, the project manager did not share a change order of nearly $18,000 with the DMV because he discussed change orders with the client agency only if they involved client requested revisions or were especially extensive. However, in our client agency survey, the DMV stated that the division sometimes notified it of change orders on a timely basis and told us that it had concerns with the project’s time frame, indicating that room for improvement exists in the division’s communication of project changes. In one of the other three cases, the project manager indicated that she had communicated the changes to the client agency but was unable to provide documentation demonstrating that communication. In another example, the project manager for the State Publishing project told us that he typically reviewed the change order, confirmed there was enough funding to cover the request, and approved it. In the final instance, the current building manager, who was not in his position when the project was active, was unable to find documentation regarding the division’s communication of the change order. Without standard procedures for communication, including communicating change orders to client agencies and documenting that communication, project managers may not share all pertinent information with client agencies.

In terms of its communication with client agencies, the division generally received moderate reviews on our client agency survey. However, client agencies had suggestions for ways the division could improve communication overall. For example, when we asked the survey respondents to rate the division’s overall communication of project progress, they gave the division an average score of 3.5 out of 5. Similarly, survey respondents on average rated the division 3.6 and 3.5 out of 5 when asked whether the division clearly communicated project time frames and project costs, respectively. We further inquired whether the client agencies had suggestions for how the division could improve its client communications overall, and 10 provided feedback. For example, the California Highway Patrol recommended that division staff respond to client questions in a timely manner, while the California Department of Insurance suggested that division staff set up regularly scheduled meetings to keep client agencies updated and projects moving forward. This feedback indicates that the division’s policy for allowing individualized methods of communicating with client agencies could be improved.

We also asked the client agencies for the projects we reviewed—to the extent they had previously obtained delegation authority to complete a project using private contractors instead of the division—about how their experience using private contractors compared to using the division to complete projects. As we explain in the Introduction, client agencies can do this under certain circumstances. Ten of the client agencies we surveyed indicated that they had used a private contractor in lieu of the division to complete a capital outlay or tenant improvement project. Overall, seven of the 10 respondents indicated that their experience using a private contractor was better than their experience using the division. Further, all 10 client agencies responded that the private contractor clearly communicated estimated project costs always or most of the time, compared to 13 of the 19 client agencies responding to a similar question about their experience with the division. Similarly, all 10 client agencies indicated that the private contractor communicated changes in estimated time frames always or most of the time, as opposed to 13 of the 21 client agencies that responded to a similar question about the division. This disparity in client agencies’ experiences in working with the division versus private contractors indicates that room for improvement exists in the division’s process for communicating with client agencies.

Finally, we asked client agencies about their experiences in receiving bills or invoices from the division for work performed on the respective project. The capital outlay program manager explained that the project management branch does not believe a final bill or invoice is necessary because the client agency is able to calculate the final cost using the bid estimate and augmentations. He did state that a client agency may request itemized costs. Similarly, instead of a bill or an invoice, the construction services branch provides its client agencies with a project completion notification; however, this notification does not itemize the expenses for the client agency.

When we asked the client agencies if the division provided them with bills or invoices that clearly reflected the work for which they were charged, nine of the 21 respondents indicated that it had not. Five of the nine responded that they were not confident that their agency knew what work it had been charged for, suggesting that the division had not informed them of their project costs through other means. For example, State Publishing indicated that it did not receive details regarding the work for which it had been charged. Although eight of these nine respondents, including State Publishing, knew that they could request a bill if they wanted one, we believe client agencies should not need to request a bill for services rendered and should not be confused about the work for which they are charged. As an example supporting our belief, the California Department of Parks and Recreation indicated in the survey that it made numerous requests for billing information and received only occasional responses. When we asked the construction services branch about this concern, its acting chief could confirm only that the project file did not contain any requests for detailed cost information and beyond that could only speculate as to the reasons for the department’s survey response. Without knowing, at a minimum, the final cost of a project, the client agency cannot be certain whether it has any funds remaining that could be used for other purposes or that it was appropriately charged for the work performed.

The division has not developed adequate goals or meaningful metrics by which to measure its progress in delivering projects on time and within estimated costs. This is of particular concern given that the division frequently exceeded estimated time frames and costs for the projects we reviewed. Specifically, it has developed a strategic plan for the years 2014 through 2018 that, according to the division, is focused on guiding the division toward excellence in its core responsibilities. Given that one of the division’s core responsibilities is to manage the delivery of construction projects, we expected to find goals and objectives pertaining to this core responsibility; however, the strategic plan contains no such elements. Further, although one of its goals is “we are customer centered,” its objectives for determining whether it achieves this goal are based on a customer satisfaction survey of client agencies that, according to available documentation provided by the division, has been inconsistently administered across the division. Additionally, when we asked the division’s acting deputy director why the strategic plan lacks meaningful goals and objectives that are focused on its effective and efficient delivery of projects—such as a goal of delivering 75 percent of projects within estimated time frames—he speculated that the strategic plan reflected the division’s priorities at the time of its development. While this may be true, given that project delivery is one of the division’s core responsibilities, we are concerned by the absence of goals and measurable objectives in its strategic plan to help it gauge whether it is fulfilling this responsibility.

Because it has not developed meaningful goals and objectives to assess its performance in terms of project delivery, the division is missing a key opportunity to obtain information critical to developing effective training for its staff. Thus, it is not surprising that we found the training the division does provide to staff—with the exception of a new training program implemented by the construction services branch—to be inadequate and infrequent. Currently, although the project management and building management branches asserted that their employees attend some trainings, the examples they cited included lunchtime sessions regarding changes to building codes, monthly forums to discuss a variety of branch specific topics, and mandatory training in line with the training for all other General Services’ employees, such as ethics training. Because the trainings cited do not specifically focus on the timely and effective delivery of projects, we question how these two branches have any assurance that their staff, particularly their project managers, are receiving consistent and effective training on how best to manage the projects they are responsible for delivering. In fact, the documentation these two branches provided regarding their staff trainings fell short of constituting any type of formal training program. According to the project management branch chief, the branch has established subjects for a planned training program including project management. However, the branch has not established the training dates or curriculum. Given that the majority of construction projects we reviewed exceeded their estimated time frames and costs, we are concerned that without a formal training program that targets the effective and efficient delivery of projects, the overages we identified will continue.

In contrast, the construction services branch recently hired an external consultant to implement a new training program tailored for that branch’s construction supervisors, who we refer to as project managers in this report. The program includes a variety of topics—examples of which relate to managing small projects, communicating effectively, and managing risk. The construction services branch held its first training session in October 2015. However, as of February 2016, the acting chief of the construction services branch stated that this branch had only 95 staff—less than 5 percent of the division’s total staff—and that it manages just a small portion of the division’s capital outlay construction projects. Although this branch is part of the overall division, we are concerned that it is the only branch to implement a formal training program. The acting chief of the construction services branch explained that the branch implemented these trainings because it recognized that its project managers had different skill sets and backgrounds, and it wanted to help ensure that its project managers had a common knowledge base from which to successfully manage projects.

When we asked for the division’s perspective regarding why it does not impose training requirements on its staff as it relates to project delivery, the chief of the project management branch spoke on behalf of the division and explained that it hires experienced employees who meet extensive minimum qualifications and who receive on the job training. Further, he indicated that if a staff member were insufficiently trained, management would, among other things, receive complaints. However, as mentioned previously, although the division states that it conducts a survey of its client agencies to help inform whether it is achieving its strategic goal of being customer centered, according to available documentation, the division has not consistently administered this survey to its client agencies. We believe this is an inadequate approach to receiving feedback, including complaints, regarding the performance of its staff. Even with experienced professionals, it is a best practice to consistently refresh their skills and inform them of effective project management techniques and strategies.

Additionally, the project management branch has numerous positions requiring staff to maintain a valid certificate of registration as an architect or engineer. The California Board for Professional Engineers, Land Surveyors, and Geologists does not require any continuing education for certified engineers, and the California Architects Board requires only five hours every two years specifically related to the disability access requirements. Because the division’s project management staff are not required to receive extensive training as a part of their licensing requirements, the burden falls to the division to ensure that it has properly trained staff. Without a formal training program that incorporates mechanisms to evaluate the division’s processes, identify any gaps that require improvement, and provide the needed training related to project delivery, we question how the division can claim that its staff are adequately trained.

Recommendations

Legislature

To improve efficiencies and reduce some costs for less complex and easily repeatable projects, the Legislature should authorize the division to create and implement a pilot program for job order contracting for appropriate projects, including a requirement that the division award contracts to the most qualified responsive bidders. The division should report to the Legislature on its progress within two years of implementing the pilot program, including, at a minimum, information regarding the time and cost savings the pilot program provided the State.

Division

To ensure long term efficient and effective delivery of projects, the division, in its planned implementation of its new project management system in July 2017, should do the following:

Ensure that the project management system can centrally track and extract all data regarding project status, including time delays, cost overages, and the reasons for each.

Track the reasons that projects are pending to identify its true backlog of projects. In doing so, it should develop a process to follow up on those projects that are pending to ensure that they are not on hold unnecessarily and are appropriately moving forward.

At least annually, use the centrally tracked data to identify common themes in the causes for project delays and cost overages and develop solutions to address these issues. Further, it should report the results of its review to General Services’ executive management.

Until the division implements its planned project management system, it should, by September 2016, develop a process to, at a minimum, identify project status and reasons for project delays as well as cost overages. Using these data, the division should modify its project management processes to ensure the efficient and effective delivery of projects.

The division should develop and implement a process for preparing reasonable time frames and cost estimates for its projects within the building management branch. To better inform the development of this process, the division should evaluate the branch’s structure, which should include a staffing analysis, to determine whether it is effectively organized and whether it should add cost estimator positions.

To ensure that client agencies are paying equitable rates, by December 2016 General Services should develop and implement a strategy for allocating its administrative costs equally among all the projects it completes for client agencies, including those portions outsourced to private firms.

To ensure that the project management branch charges its client agencies a competitive hourly rate, by December 2016 and every two years thereafter, the division should conduct a rate analysis that fully accounts for differences between the project management branch’s rate and private firms’ rates. If it finds that the rates are not competitive, the division should identify and implement strategies to ensure that the project management branch’s rates are as competitive as they can be with those of its private firm counterparts. Further, the division should explore andimplement any other reasonable methods to ensure that it is delivering projects as cost effectively as possible.

To improve its communication with client agencies, the division should do the following:

Ensure that project managers are using consistent procedures by providing specific expectations related to communicating and documenting time delays, cost changes, and change orders, at a minimum.

Develop a process for providing periodic detailed bills and invoices to client agencies clearly describing the work for which it is charging.

To effectively evaluate the performance of its branches in delivering projects, the division should develop meaningful goals and objectives and a method of measuring its success in achieving them as part of its strategic plan that is focused on ensuring that projects are delivered on time and within budgeted cost estimates.

To ensure that its project management staff are adequately trained and have the information necessary to deliver projects as efficiently and effectively as possible, the division should do the following:

Conduct a comprehensive survey every other year of all of its client agencies to inform necessary improvements to its processes and training program and, in the interest of transparency, make the survey results public.

Develop and implement by December 2016 a periodic training program for staff within its project management and building management branches. This training program should include updated information that reflects any processes it revises based on its review of critical project status data and its progress toward meeting its goals.

We conducted this audit under the authority vested in the California State Auditor by Section 8543 et seq. of the California Government Code and according to generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives specified in the scope and methodology section of the report. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

For questions regarding the contents of this report, please contact
Margarita Fernández, Chief of Public Affairs, at 916.445.0255.

Footnotes

3 As we describe in the Scope and Methodology, we focused our review on the project management branch’s rate because it had a significantly larger number of construction projects than the other two branches. Furthermore, unlike the other two branches, the project management branch maintains retainer contracts with private firms that conduct similar work for the State, allowing us to conduct such an analysis. Go back to text

4 We included the project management branch’s overhead in this analysis, as the chief stated that this charge is similar to certain senior management rates we included in our analysis of private firm rates. Go back to text